Hikmet Ersek is the CEO of Western Union. He recently published an article to CNN’s Fortune Finance section with a simple title (Western Union CEO: What digital currencies are missing), harnessing his expertise from his position as CEO of an international money services company to lecture on the inadequacies of Digital Currencies. The article is the first part of a 3 part series that is still forthcoming, I look forward to seeing what else the CEO of Western Union thinks is missing from Digital Currencies.
In the thesis to his argument, Ersek claims that the current digital currency narrative is only appealing to the “First World.”:
The current digital currency narrative, while certainly attractive to entrepreneurs, venture capital, and the media, is extremely “First World” in nature. And a primary question remains — do such innovations, as we know them today, address the needs of consumers and businesses on both sides of an international transaction? In its current form, the answer is no, but there’s potential, and that is something I am watching with great interest.
Ersek goes on to expound on the inadequacies of Digital Currency in the use of international payments.
For every international payment, there is a sender and a receiver… Up to this point, the digital currency conversation has not addressed the practicalities on the receive-side. Will the person receiving digital currency in a rural village in the Philippines be able to use it? Will the small or medium-sized enterprise have the technology capacity to spend, or transfer it? And most importantly, does the receive-side consumer or business actually want digital currency — if given the choice, would they prefer cash, or want the money in their bank accounts?
It is true that a rural village in the Philippines might not have the technological capacity to spend or transfer digital currency. However, Digital Currency could still aid the remittance process of sending USD from the States and converting it to PHP in the Philippines. In fact, there are reports on Reddit of a Canadian-Filipino doing just that.
How International Payments With Digital Currency Will Work For 1st And 3rd Worlders
This is one of Ersek’s main points from this article: that Digital Currencies are not yet ready for the receiver side of the transaction. All it takes is fully compliant Digital Currency exchanges on both sides of a border for a successful international payment. Ersek correctly identifies that getting fiat into Digital Currency is uniformly easier in first world countries. There are established and compliant ATMs, exchanges, and even individual dealers.
It seems that Ersek thinks that these Digital Currency services, such as BitPay and Coinbase and CoinVoice, have arisen in first world countries only as a result of consumer adoption and ongoing speculation. More importantly, he does not believe that third world countries would ever organically develop counterpart Digital Currency services by themselves. Third World countries will adopt Digital Currency in all its forms because the incentives to do so are strong, especially in countries where Digital Currency’s exchange rate volatility pales in comparison to the native fiat’s volatility. For a great example of Digital Currency being used in a Third World country, check out M Pesa.
Domestic Remittances, perhaps more so than international remittances, will highlight Digital Currency’s superiority as a medium of exchange. Digital Currency services will first appear within countries to service domestic payments and remittances. Once said services are established, the international infrastructure for Digital Currency payments will be in place.
Unless They Adapt, Western Union Will Eventually Be Overtaken By Businesses Utilizing Digital Currency
Very simply: Western Union is in the business of taking value, “securing” it, and transporting it elsewhere (usually across borders) and charging a reasonable fee for it. Reasonable is always a relative word, because the same process can be accomplished using Digital Currency as the medium (instead of Western Union) for an even more “reasonable” fee. Individuals around the world are already using Digital Currency in lieu of Western Union.
Advancements in Digital Currency such as Buttercoin, Ripple, Ethereum, etc will expedite the process of Digital Currency adoption all around the world. The process is bottom up and still nascent; however, it will arise simultaneously around the world, not just in the “First World.”